Advancing Stage is the 2nd stage of the Four Stages of the Stock Market. It starts after the stock or index breakout from the channel of an accumulation stage. As an investor or trader, you should be cautious about the fake breakout. In order to confirm that current up move is a part of advancing stage, you can find out the ratio of no of days the market or stock was up during accumulation stage and no of days it closed in the red. If this ratio is more than 1 then it implies that uptrend is a part of advancing stage otherwise, it is a fake breakout.
There are few other ways to find the advancing stage. You can take a position if the stock or index breaks the channel. Alternatively, you can check Fibonacci retracement or long term support and resistance of a stock or index.
Also, take care of following do's and don'ts
1. Do not take any position if the stock or index already moved around 30%.
2. You can find out advancing stage is in its last leg if the next month option chain is bearish.
3. Lastly, if everyone turns bullish on the stock or market then it signals the end of advancing stage and start of the distribution stage.
This video is part 3 of the 5 part video series Why technical analysis doesn't work and we are learning about the 4 stages of the stock market.
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